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CA Intermediate · Advanced Accounting · AS 4 Contingencies and Events occurring after the Balance Sheet Date

Anand Pharma Ltd. approved its financial statements for the year ended 31 March 2026 on 30 June 2026. On 15 May 2026 the board proposed a final dividend of Rs 4,50,000 for 2025-26, to be placed before shareholders at the annual general meeting. Under the current AS 4 as applicable for Indian companies, how should this dividend be treated in the 2025-26 financial statements?

The dividend is not recognised as a liability at 31 March 2026, because no present obligation existed at that date when it was only proposed afterwards. It is disclosed in the notes to the financial statements as required by the revised AS 4.

  1. ARecognised as a liability at 31 March 2026 by debiting profit and loss
  2. BRecognised as a provision at 31 March 2026 and also disclosed as a contingent liability
  3. CNot recognised as a liability at 31 March 2026, but disclosed in the notesCorrect
  4. DIgnored entirely until the dividend is actually paid

Explanation

Under the revised AS 4, dividends proposed or declared after the balance sheet date are not recognised as a liability at that date because no obligation exists then. They are disclosed in the notes to the financial statements. Option A reflects the old treatment, which is no longer permitted.

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